RMC No. 45-2015: Clarifies the withholding of VAT on government money payments for OECF-funded projects under Exchange of Notes between the Republic of the Philippines and the Government of Japan

Summary

RMC No. 45-2015 clarifies the withholding of VAT on government money payments and payments to non-residents for OECF-funded projects under the Exchange of Notes between the Philippines and Japan.

Key points

1. Validity of RA No. 9337. The BIR upholds the validity and application of RA No. 9337 to government money payments under OECF-funded projects.
2. Government assumes the VAT. The Government of the Philippines, itself or through its executing agencies or instrumentalities, assumes the final withholding VAT at 5% of the gross payment under Section 114(C) of the NIRC, as amended. It is paid from government funds as final settlement of the tax due on income received by Japanese contractors.
3. Billing. Japanese contractors of OECF-funded projects cannot include in their billing the whole 12% VAT that the Philippine Government or its agencies assume under the Exchange of Notes.
4. RMC No. 42-99. RMC No. 42-99 no longer applies to cases or transactions after the effectivity of RA No. 9337. A RMC only amplifies the law, so it cannot apply to transactions now covered by the amendatory law.

Who is affected

• Japanese contractors of OECF-funded projects
• Philippine government agencies and instrumentalities making payments

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.